The U.S. Court of Appeals for the Federal Circuit smacked Apotex with a contempt judgment after finding it filed a repetitive Abbreviated New Drug Application (ANDA) with the Food and Drug Administration (FDA). Abbott Labs v. Torpharm and Apotex (07-1019).

This involves an ongoing dispute with TorPharm and Apotex in trying to market a generic version of Depakote®, an anti-seizure medication containing divalproex sodium patented, produced, and sold by Abbott

The U.S. District Court held Apotex in contempt for violating an injunction barring it from commercially manufacturing, using, selling, offering to sell, or importing into the United States generic divalproex sodium infringing Abbott’s U.S. Patent Nos. 4,988,731 and 5,212,326 until their expiration.

The CAFC upheld the district court’s decision to entertain a contempt proceeding as well within its discretionary authority. However, because the district court erred in finding Apotex in contempt when the conduct at issue was not within the express terms of the injunction, we reverse the district court’s judgment of contempt.

Earlier, Apotex filed an ANDA under the Hatch-Waxman Act to get FDA approval to manufacture and sell a generic version of Depakote®. The active ingredient of Depakote® is divalproex sodium. In its paragraph IV certification, Apotex certified that the Abbott patents were invalid.

Abbott sued and the district court granted summary judgment in favor of Abbott on both validity and infringement. On appeal, the CAFC affirmed the ruling on validity but remanded for a trial on infringement.

On remand, the court concluded that Apotex’s filing of the ANDA infringed the claims of the Abbott patents because Abbott’s claims read on the product that was the subject of the Apotex ANDA. The district court entered the following injunction:

TorPharm, Inc., Apotex, Inc., Apotex Corp., and their respective affiliates, successors in interest, and assigns are enjoined from commercially manufacturing, using, selling, or offering to sell generic divalproex sodium which the Court has found to be infringing within the United States, or from importing such product into the United States, until Abbott’s U.S. Patent Nos. 4,988,731 and 5,212,326 expire and defendants have received final approval from FDA to market generic divalproex sodium.

The effective date of any approval by FDA of ANDA No. 75-112, or any other application concerning defendants’ generic divalproex sodium which the Court has found to be infringing, shall be no earlier than January 29, 2008, the date of expiration of Abbott’s patents.

Apotex tried to design around Abbott’s patent claims and allegedly developed divalproex sodium in the form of a polymer which differs from an oligomer in that the polymer is made up of much more than about 4 to 6 repeating units of divalproex sodium.

But, rather than file a new ANDA itself, Apotex entered into an agreement with Nu-Pharm where Apotex would pay costs but Nu-Pharm would take on the “litigation risks” from the filing. Nu-Pharm then filed the second ANDA with a paragraph IV certification that its product did not infringe the claims of the Abbott patents.

The court found Apotex in contempt for violating the injunction characterizing the injunction as extending to “any ‘generic divalproex sodium’ manufactured by Apotex that has been ‘found to be infringing.’” The court found that there was no difference between Apotex’s old product and its new product. So, the district court “extend[ed] the injunction to embrace” the Nu-Pharm ANDA. Specifically, the expanded injunction prohibited Apotex from:

commercially manufacturing, using, selling, or offering to sell generic divalproex sodium … until Abbott’s U.S. Patent Nos. 4,988,731 and 5,212,326 expire and defendants have received final approval from FDA to market generic divalproex sodium.

The district court stated that should the violation continue, Apotex “will be risking heavy sanctions for its willful disobedience of the injunction.”

On appeal, Apotex argued that the contempt proceeding was beyond the district court’s statutory authority because the Hatch-Waxman Act does not itself grant a district court subject matter jurisdiction to conduct such contempt proceedings. The court agreed stating:

While the Supreme Court has characterized infringement as defined in the Hatch-Waxman Act as “highly artificial,” see Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661, 678 (1990), by statutory command it is infringement nonetheless. Apotex has failed to provide any authority, be it statute, case law, or legislative history of the Hatch-Waxman Act, suggesting that suits commenced under the provisions of the Act are to be treated any differently than patent infringement suits under 35 U.S.C. § 271(a).

The district court found that “Apotex’s choice of Nu-Pharm to file the ANDA was a subterfuge intended to give Apotex a crack at another district judge” who might find that Nu-Pharm ANDA drug noninfringing. Abbott V, 455 F. Supp. 2d at 835. We do not disturb that finding, and conclude that the district court did not abuse its discretion in electing to try issues relating to the Nu-Pharm ANDA in a contempt proceeding.

Notwithstanding the above, we have held that before entering a judgment of contempt of an injunction in a patent infringement case, a district court must address two separate questions. … First, the district court must address whether a contempt hearing is an appropriate forum for adjudging whether an allegedly redesigned product is infringing. … Second, if contempt proceedings are appropriate, the district court must address whether the accused product infringes the claims of the asserted patent.

Where, as here, a party files a second ANDA to a drug having no more than a colorable difference from the first, the district court is well within its discretion to entertain contempt proceedings.

In looking at the finding of contempt, the Federal Circuit held that:

We hold that the district court made an error of law in interpreting its original injunction to preclude the conduct of which Abbott complains, namely the filing of the Nu-Pharm ANDA, and thereby abused its discretion in holding Apotex in contempt.

By its plain language, the injunction issued in Abbott III only (1) enjoined Apotex from commercially manufacturing, using, selling, or offering to sell generic divalproex sodium which the Court has found to be infringing within the United States and importing such product into the United States until expiration of the Abbott patents, and (2) prohibited the FDA from approving the Apotex ANDA as well as any other ANDA application filed by Apotex directed to generic divalproex sodium which the Court has found to be infringing until expiration of the Abbott patents.

In other words, while contemplating the filing of new and/or amended ANDAs, the injunction only provided the FDA with the necessary “explicit notice” that it was prohibited from approving the Apotex ANDA or any other ANDA concerning Apotex’s generic divalproex sodium which a court found to be infringing prior to expiration of the Abbott patents. The injunction contains no “explicit notice” to Apotex that the filing of a new ANDA, by itself or a straw party, was forbidden.

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